Performance Management: What You Need to Know

For many organizations across the nation, it is that time of year again – time for the annual performance management cycle to close, and another to begin. This provides an ideal opportunity for organizational leadership to reflect upon the effectiveness of their current performance management systems and processes.

But, what are these systems and why are they so important? While each organization should define specific goals for their performance management system based on their mission and strategy, several common goals include: informing decision-making about pay and promotions; aligning individual work to reach the organization’s goals; and supporting employee development.[1] In times when competition for business and talent is high, designing human capital programs that engage employees is vital. With this in mind, the design of each system should support employee growth through ongoing feedback and development, and allow employees to see a meaningful connection between their individual contribution and the organization’s success.

Over FMP’s 25-year history, our teams of experts have supported a wide range of initiatives to develop and improve these systems using sound principles and industry best practice. Check out some of our tips for creating a modern, effective performance management system that will develop, retain, and engage your workforce.

• Keep it simple. Formal performance management processes take time. CEB found that, on average, managers spend over 200 hours completing these processes over the course of the year.[2] Making your process as clear and simple as possible can improve the return on your investment of time and resources. Instead of spending hundreds of hours on complex documentation or administrative processes, managers can devote their time to higher impact activities that engage and support employees, and focus on what is most impactful to both employee and organizational success.
• Commit to continuous feedback. The feedback employees receive through formal performance management processes should never be a surprise. To support a culture of feedback and growth, both managers and employees should actively participate in informal feedback conversations throughout the year. These frequent conversations provide a more holistic look at performance during the final review process and sets the stage for continuous growth and development. FMP has traditionally had bi-weekly meetings between managers and employees, which allows them the opportunity to talk about workload, career goals, and development.
• Focus on development. By nature, part of the purpose of a performance review is to look back at an employee’s performance from the previous year. However, effective performance discussions are also forward-looking. Talk to employees about how they can leverage their strengths to grow and achieve greater success in the upcoming year.
• Be strategic about your ratings. Many organizations have recently revisited the role numerical ratings play in their performance management systems, with some removing them completely. There is no one-size-fits-all approach for performance ratings. If you use ratings to inform decision-making on compensation or advancement, it is important for all involved to understand the expectations surrounding each rating level. The rating scale should make sense within the context of your performance elements, reflecting a level of detail that accurately differentiates performance at each level. Organizations should also have a process in place to make sure similar results or behaviors are rated consistently across managers, balancing the time devoted to calibration with the impact on outcomes. If you do not use formal ratings, work with managers on strategies to communicate clearly about employee performance without the traditional numbers or labels as an anchor.

Contact the FMP team today to discover how we can develop a tailored approach to enhancing your performance management system and processes. See how our worked translated into real results for NPR.

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[1] Mueller-Hanson, R. & Pulakos, E. (2015). Putting the “Performance” back in Performance Management. SHRM-SIOP Science of HR White Paper Series.

[2] Cunningham, L (2015). In big move, Accenture will get rid of annual performance reviews and rankings. The Washington Post.